* Spanish, Italian yields rise on euro zone concerns
* New Greek election poll shows leftist SYRIZA has taken
* European Commission calls for banking union
* Research in Motion tumbles in premarket
* Indexes off: Dow 1.1 pct, S&P 1.2 pct, Nasdaq 1.4 pct
By Chuck Mikolajczak
NEW YORK, May 30 U.S. stocks dropped on
Wednesday, as rising bond yields for Italy and Spain and the
latest poll results in Greece worsened fears about a spiraling
of the euro zone's debt crisis.
The region's fiscal woes sent the yield on the safe-haven
10-year U.S. Treasury note to the lowest in 60 years and the
euro to its lowest level in 23 months against the dollar. U.S.
equities have been closely tethered to the currency's fortunes,
with a 50-day correlation between the euro and the S&P 500 index
"The longer they (Europeans) drag it out, the less severe
are the ramifications of a break-up and then who actually ends
up exiting - so much of this is unwritten it is hard to put any
sort of odds on how this plays out," said Nathan Snyder,
portfolio manager at Snow Capital Management in Sewickley,
Yields on 10-year Spanish bonds moved closer
to the 7 percent level, a point at which other nations in the
bloc were forced to seek a bailout.
Spain is expected to issue new bonds shortly in an effort to
fund its troubled banks despite the increased borrowing costs.
Adding to the concern, Italian 10-year yields
topped 6 percent for the first time since January at a bond
sale, raising concerns the region is vulnerable to a contagion.
Investors were given cause for optimism after the European
Commission said the the euro zone should move toward a banking
union, consider eurobonds and the direct recapitalization of
banks from its permanent bailout fund as well as boost growth
and cut debt.
But the cheering was short-lived after the latest poll from
Greece showed the radical leftist SYRIZA party has taken the
lead over the pro-bailout conservatives ahead of a national
parliamentary election next month that may determine whether the
debt-laden country stays in the euro zone.
"It seems inevitable the euro has got to break up, it's just
how long can they drag it out and what are the ramifications,"
said Snyder of Snow Capital Management.
The CBOE Volatility index jumped more than 10
percent, it's biggest spike since mid-April.
The PHLX oil service sector dropped 2.9 percent with
U.S. crude down more than 2 percent as the euro zone's
debt problems and signs China was not planning a large stimulus
package stoking demand fears. National Oilwell Varco Inc
lost 2.6 percent to $68.19.
European shares were buffeted by the conflicting headlines,
with the latest Greek poll pushing the FTSEurofirst 300 index
down more than 1 percent.
The Dow Jones industrial average dropped 135.21
points, or 1.07 percent, to 12,445.48. The Standard & Poor's 500
Index lost 16.32 points, or 1.22 percent, to 1,316.10.
The Nasdaq Composite Index slumped 40.97 points, or 1.43
percent, to 2,830.02.
U.S. economic data showed contracts to purchase previously
owned U.S. homes unexpectedly fell 5.5 percent in April to a
four-month low, dealing a blow to more recent optimism the
housing sector may have hit a bottom.
Research In Motion Ltd tumbled 10.6
percent to $10.05 as the biggest percentage decliner on the
Nasdaq 100 index. The company hired bankers for a
far-reaching strategic review and to look for partnerships as
the BlackBerry-maker warned it would likely report a shock
fiscal first-quarter operating loss.
Apple Inc slipped 0.9 percent to $567.14 after
Chief Executive Tim Cook, speaking at the All Things Digital
conference said technology for televisions was of "intense
interest" but stressed the company's efforts would unfold
gradually amid speculation the iPad and iPhone maker was on the
brink of unveiling a revolutionary iTV.
Macy's Inc reported better than expected May
same-store sales on Wednesday, helped by its growing e-commerce
business. Shares slipped 2.9 percent to $37.86.
Pep Boys-Manny, Moe & Jack plunged 21.7 percent to
$8.68 in premarket after the automotive parts and service chain
said the sale of the company to private equity firm Gores Group
has been called off.